The Research Of Foreign Investor's Trading And Impact On The Stock Market Volatility

This paper will start with a brief introduction of China Stock Market opening to the outside world,comprehensively introduce the background and specific measures and analyze the relationship between China's introduction of foreign investors and china economic development.On the basis of the results,I will carry out empirical study to resolve two problems encountered in my ten year's career life in a joint venture: the first is to leverage the ARCH/GARCH model to analyze whether to further open our stock market to foreign investors will have any volatility impact;The second is to study and discuss the feasibility of reforming securities account structure and settlement model in response to the needs of foreign investors and mitigate trading risks.Finally,I will provide the research conclusion and respective improvement measures.The key output of this article is that the volatility analysis is no longer confined only to the Qualified Foreign Institutional Investor,but keep up with the latest capital market opening policy,the RMB Qualified Foreign Institutional Investor,the Stock Connect,A Share inclusion in MSCI index are all taken into consideration,to analyze the impact on volatility of both Shanghai Composite Index and stocks with foreign investors as majority shareholder,and a comparative analysis of volatility in different period of time will also be employed.For foreign investors' new trading request,I analyze the possibility of implementing new account structure and settlement model without a fundamental change.From the research,we find that although there is no significant correlation between the return volatility of stock and the participation of foreign investors,we can still find that the impact of foreign investors on china stock index is smaller than that of stock with foreign investor as the majority shareholder.The earlier QFII Scheme has little volatility impact on our stock market,but the subsequent series of opening policy and the promotion of foreign investor increased the volatility of stock market index,especially the stocks with foreign investor as the majority shareholder.But as we're becoming more and more familiar with the opening policy,to a certain extent,foreign investor's participation reduced the market volatility.In dealing with foreign investors trading and investment demand,we can draw lessons from the practice of oversea mature markets.Without changing the fundamental rules of account management and settlement model,we can still do something to cope with the increasing trading risk and volatility and to meet the enhanced efficient clearing and settlement needs from foreign investors.